Golden Visa and NHR: guide to recent changes

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Golden Visa, associated with a competitive tax regime (the non-habitual resident status) and a country with an excellent climate, security, gastronomy and quality of life, has put Portugal in the sights of investors from all over the world, who suddenly saw this country as an excellent investment opportunity.

Since Golden Visa was created in 2012, the program has achieved surprising results and, in ten years, has captured more than five billion euros of investment.

The Portuguese Government had decided at the end of last year to approve a package of measures that would change the regime of the Golden Visa and the Non-Habitual Resident Status.

But, after all, what does really change and what remains the same?

Regarding to Golden Visa, for now, nothing changes because the Government already has explained that for now and taking in consideration the effects of the COVID-19, the Golden Visa will not change.

The benefits remain the same: through this program, it continues to be possible to apply for Portuguese temporary residence and, consequently, to move freely across the 26 countries of the Schengen Area.

The program is also extendable to family members, without having to repeat the investment.

For that, the applicant only needs to observe three requirements:

  1. Time requirement: the applicant must observe a mandatory minimum period of stay in Portugal, remaining in the country for at least 7 days in the first year and 14 days in the two following
  2. Material requirement: the applicant has to make an investment, which can namely be the acquisition of a property with a value of at least € 500.000,00 (if new) or € 350.000,00 (if is over 30 years old or located in an urban rehabilitation area), the transfer of at least € 1.000.000,00 of capital to Portugal or in the creation of ten jobs.
  3. Qualitative requirements: the applicant cannot have been convicted of a serious crime.

After five years, the applicant and his family can apply for Portuguese nationality or permanent residence, having for this purpose to pass in a Portuguese language test.

What about the non-habitual tax regime?

This regime has been created in 2009 and offers a set of tax advantages for foreign professionals and pensioners. Traditionally it allowed workers in areas of “high added value” to be taxed at a special tax rate of 20% (below european average), exempt from taxation the abroad incomes from abroad and permited that pensioners could be exempt from any taxation of income (if that was possible under the European agreements that prevent double taxation).

Yet, the 2020 State Budget provides for some changes to this regime, which are already in force.

In short, the requirements for accessing to this regime remain the same: the applicant can not have been a tax resident in Portugal in the last 5 years, has to have a Portuguese tax identification number (NIF) and has to have a residence in Portugal at the moment of the application.

For workers in activities with high added value, the single tax rate of 20% of wages is maintained. However, there are some changes:

  1. Income from foreign sources will no longer be exempt if it comes from countries included in the black list;
  2. Wages obtained abroad will not be taxed only if they have been taxed in the country of origin;
  3. All other foreign incomes will only be exempt from taxation if the double taxation agreement provides the taxing power to the country from which the income originates or, in the event that there is no double taxation agreement, only if the income can be taxed in the jurisdiction where it originates and is not considered obtained in Portugal or in a country included in the black list.

Pensioners will now be taxed and the possibility of exemption will no longer exist. However, pensioners can benefit from a reduced rate of 10% tax if there is taxation in the country of origin or if the income is not considered to be obtained in Portugal under domestic law.

In short, these are the major changes that the State Budget implies in these matters.

Although they are relevant to investors, the truth is that they are not unshakable barriers nor do they affect the competitive advantages of Portugal, which remains one of the best countries in Europe to invest and one of the countries with the highest quality to live.

Article written by: Ricardo Ferreira, Partner & Director at Martínez-Echevarría & Ferreira – Law Firm (Partner of United Investments Portugal)